TECH TALK: An Indian in China: Challenges for China

China’s unprecedented growth may have wrought an economic miracle but the challenges do not go away. A recent Internet poll by the People’s Daily identified Corruption and the WTO (World Trade Organisation) entry as two of the key challenges. Even as China tries to catch up and overtake others, one needs to remember that its size – a population of 1.3 billion – makes that a daunting task.

There are in fact two Chinas – one is the urban, rapidly modernising mass of 400 million, while the other is the agriculture-based rural China with 900 million people. What we see and hear about is the new, urban China. No doubt that is glitzy and awesome. But the sheer size of even China’s countryside makes it important to consider their future. Wrote James Kyge in The Financial Times (October 8, 2001):

Trade and foreign account for over 40% of China’s GDP, so a significant decline in both next year could jeopordise the country’s rapid growth, revive arguments that the renminbi currency may need to be devalued and spur the government to increase its planned fiscal stimulus. If the pain becomes intense, the focus of the investor community could swivel from the growth story to converge in the fragile underpinnings of China’s economic takeoffThe gap between the rich and poor is now among the highest in the world. The growth in the urban economy is robust but the countryside is bogged down in debts and inefficient farming practices. It is in this context, several economists say, that makes China’s entry into the WTO a source of concern.

This is because the WTO will open up China’s markets, especially the agricultural sector, to foreign competition. This may lead to the closure and displacement of several millions of people, who will now need to be given alternative employment.

Wrote Dexter Roberts and Mark Clifford in a recent Business Week cover story:

Much of China’s growth has been generated by tens of thousands of new private and quasi-private enterprises that can’t, or won’t, be tightly controlled from the top. [China’s new leaders] must continue the delicate process of dismantling thousands of useless state enterprises and finding work for millions of displaced workers. And of course, now that China is a member of the WTO, [the leadership] will be forced to abide by its structures – some of which will be deeply painful to society.

To achieve a transition to a market economy while addressing the deep imbalances between rich and poor, fostering a common purpose to unify 1.3 billion people and 55 ethnic minorities, and satisfying its commitments to external authorities such as the WTO will be daunting.

There is also a social aspect to what’s happening in China. I was speaking to a friend in Shanghai who has been in China for the past 6 months. He pointed out something very interesting. Due to the single-child policy followed by the Chinese government for the past two decades, there is now a full generation of Chinese who have known no siblings. Family is just parents and grandparents, no brother or sister. One of the strengths in India has the network of family relationships. In tough times, there is always family to fall back upon. In China, however, this is not there for the most part now for the youth. For the first time in the world’s history, an entire society of single children gets ready to face and cope with the future. How this will play out, especially if the times get tough, is anybody’s guess.